So far, 2024 has been a rough year for the real estate market, with high mortgage rates, stubborn home prices, and sluggish sales—but things may finally be looking up.
According to Realtor.com®’s 2024 Mid-Year Housing Market Forecast, the next six months should bring welcome relief to homebuyers and sellers in the form of lower mortgage rates.
According to Freddie Mac, interest rates on 30-year fixed-rate home loans have already fallen to 6.47 percent in the week ending August 8, the lowest level in over a year.
And they could fall even further: Economists at Realtor.com predict a rate of 6.3% by the end of 2024.
“Economic signals suggest that the Fed should begin cutting its key interest rate in 2024,” says Realtor.com’s chief economist Danielle HaleThis reduction is a “long-awaited relief in mortgage interest rates”.
While many other real estate market predictions depend on how far interest rates fall, Realtor.com’s team of economists is forecasting how the housing market will perform over the next six months, and there’s plenty of hopeful news for home buyers and sellers.
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Mortgage rates will finally fall
To keep inflation in check, the US Federal Reserve has kept its key interest rates high for years, but is now signaling that it could cut interest rates next month.
Recent data, including the July jobs report, showed that unemployment is rising. This is “evidence that Fed policy is working – perhaps even working overtime – and a rate cut, even a significant one, may be appropriate,” Hale says.
Even though mortgage rates don’t exactly follow Fed rates, both tend to move in the same direction. Any reduction in Fed rates should ultimately lead to a reduction in mortgage rates as well.
“Although the Fed has not cut rates this year, we expect it to do so starting in September,” Hale adds. “We will see Fed rate cuts before the end of 2024, and they will be larger than we expected at the beginning of the year.”
Home prices will remain stable
For homebuyers struggling with high mortgage rates, the fact that home prices have remained high this year is a cause for frustration.
“Despite higher mortgage rates, rising inventory levels and longer property availability on the market, prices continue to rise,” Hale explains.
As a result, Realtor.com’s economic team expects prices to increase by 4.6% by the end of the year.
“Sales prices have continued to rise, with June hitting a new record for the median sales price of existing homes,” Hale says.
The “lock-in” effect on mortgages will diminish
Over the past six months, the number of homes for sale has increased “more than expected,” says Hale, who expects the housing stock to grow by 14.5 percent this year.
“We saw a significant improvement in inventory levels in the first half of 2024, up more than 35% year-on-year,” she says.
The upswing can be attributed to several factors: Buyers facing affordability issues stayed away from the market and housing inventory swelled. At the same time, sellers – many of them shackled by the “golden handcuffs” of low interest rates – also pulled back when rates fell earlier this year.
“The lock-in effect is probably still holding back many sellers, but we expect that number to decrease over time,” says Hale.
However, housing inventory is still below pre-pandemic levels. Of the 50 largest markets tracked by Realtor.com, only 12 have returned to or exceeded their pre-pandemic inventory levels.
Home sales will continue to be sluggish
The normally busy spring home-buying season was dampened by high mortgage rates. In June, existing home sales fell to 3.89 million, the lowest level in six months.
But when interest rates fall, more sellers are expected to put their homes up for sale.
“Home sales are expected to increase slightly in 2024 compared to the original forecast of 0.8%, bringing the total to 4.1 million. That would be the second lowest annual total since 2012,” Hale says.
As interest rates fall, she adds, “this should lead to more home sales and a more normal pace of sales that is slower than the overheated market we have seen in recent years.”
Although sellers “still have the edge,” this advantage has “been mitigated in recent years due to higher prices.”
Rents remain stable
One sector that has been spared from the ups and downs of mortgage rates is the rental market, which has remained stable in 2024.
“The tug-of-war between increasing multifamily completions, which increase rental supply, and increased rental demand has created a national stalemate,” explains Hale. “We are seeing demand from new households and existing renters who may be interested in buying a home but are finding that today’s rent-to-buy ratio is too skewed in favor of rent, but rental supply has remained the same as developers work through the backlog of multifamily homes under construction.”
Where rents are falling ultimately depends on the local level. While many metropolitan areas are seeing new rent highs, rental costs in markets like Austin, Texas and Las Vegas are more than 10% below recent highs.
Hale adds that among the 50 largest markets tracked by Realtor.com, San Francisco is the only metropolitan area where rents have returned to 2019 levels.
The presidential elections and housing policy
With housing affordability at crisis levels, the question is whether the November 5 presidential election could help alleviate that crisis. And the good news is that both presidential candidates are committed to making housing more affordable.
“Housing affordability is a key concern for voters, and both candidates are keenly aware of the need to improve housing affordability,” Hale says. “That said, I don’t expect this issue to dominate the campaign because the two parties simply aren’t far enough apart on this issue.”
(Michael Ciaglo; Justin Sullivan/Getty Images)
Both candidates, Kamala Harris And Donald Trumphave already served in the White House, which makes their economic policies more predictable.
Housing policies from both parties emphasize a shift from demand-side strategies to supply-side efforts designed to boost new housing construction. While their approaches differ slightly—Harris prioritizes affordable housing and Trump focuses on deregulation—both could help increase housing supply.
“We don’t expect the 2024 election year to have such a wild impact on the economy or the housing market,” says Hale. “But the looming political battle over tax policy changes in 2025 will create volatility further down the line.”
The NAR settlement
The agreement with the National Association of Realtors®, which is set to take effect on August 17, is expected to have an impact on the real estate industry, particularly with regard to commissions and property prices.
“We expect it will depend on both macroeconomic conditions and industry and consumer adjustment, and that any adjustments will likely be gradual over time,” Hale says.
In the past, home sellers often paid a commission, which was then split between the seller’s agent and the buyer’s agent.
“In other words, today, sellers may be writing the check to agents from the sale proceeds, but property prices are likely to be higher as a result,” says Hale.
After August 17, buyers may have to pay their agent themselves. If that norm changes, home prices could adjust to the change in buyer agent compensation “and represent an unknown for home prices not only through the end of 2024, but also through 2025,” Hale says.
